Bad debts can wreak havoc on your accounting and cause your Accounts Receivable register to show an incorrect balance. When you use the accrual method to extend your customers products or services on a credit basis you may occasionally incur bad debts. When the customer doesn't or can't pay a debt, then you need to write off the charge as an underpayment and record the bad debt using a Bad Debt account to register the loss in your Accounts Receivable account.

Create a Bad Debt Account

1

Click the "Company" menu and select "Chart of Accounts."

2

Select the "Account" button and click "New."

3

Choose "Expense" for the account type and select "Continue."

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4

Click the "Number" field and input any account numbers, if applicable. Type "Bad Debt" into the Account Name field and select "OK."

Record a Bad Debt

1

Click the "Customers" drop-down menu and select "Receive Payments."

2

Choose the customer that incurred the bad debt and leave the amount field at zero.

3

Select the line item on the register that the customer does not intend to pay.

4

Select the "Discounts & Credits" option and enter the total for the debt in the Amount of Discount field.

5

Select "Done" to close the Discount and Credits window.

6

Click "Save & Close" to save and close the transaction and account for the bad debt.

Warnings

Information in this article applies to QuickBooks 2013. It may vary slightly or significantly with other versions or products.

References

Resources

Photo Credits

George Doyle/Valueline/Getty Images

About the Author

Avery Martin holds a Bachelor of Music in opera performance and a Bachelor of Arts in East Asian studies. As a professional writer, she has written for Education.com, Samsung and IBM. Martin contributed English translations for a collection of Japanese poems by Misuzu Kaneko. She has worked as an educator in Japan, and she runs a private voice studio out of her home. She writes about education, music and travel.